The EU Commission approves State aid granted to Italy’s third largest bank in order to rectify a serious disturbance in the Italian economy (Liquidity support to MPS bank)

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Liquidity Support to Banks* Banks that receive State aid are considered to be failing banks, except when the aid is granted to solvent banks for the purpose of precautionary recapitalisation or temporary liquidity. Introduction During the past decade, large amounts of public funds have been committed to shore up failing or illiquid banks. Under current banking rules, the mere fact that a bank requests State aid triggers its classification as “failing or likely to fail” [FoLF]. A bank that is classified as FoLF must be liquidated unless it is in the public interest to resolve it. Resolution means that its systemic functions, i.e. those which are necessary for financial stability, are maintained. The exceptions to the default option of liquidation are “precautionary recapitalisation”

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